Investor Risks

Choosing a well-run project is the most important decision an EB-5 investor will make. This has become even more difficult as the number of EB-5 projects has multiplied. Over 250 Regional Centers have been approved to receive foreign investment by the U.S. government (click here for a full list). To assist investors in determining if American Logistics’ performance meets its promises we carried out a close investigation based on publicly available documents and reports from employees.

According to our analysis, investors may face serious risks related to American Logistics International Regional Center, arising from questionable job creation projections, labor unrest, and potentially strained relations with government officials.

Workforce Reductions Raise Risks for Investors

On-the-ground reports from American Logistics employees indicate that there has been about a 25% decrease in the number of truck drivers regularly working for the company since the end of 2012. The reduction in the number of jobs created seems to differ greatly from the company’s own projections and may raise significant concerns for EB-5 investors.

In a presentation to local businesses, American Logistics claimed a goal of employing around 4,000 workers within 2-3 years. Rather than seeing growth, employees of American Logistics report a slow-down in business activity and a cutback in the workforce, specifically in the number of temporary truck drivers employed through staffing agencies. In the first quarter of 2013, the number of temporary drivers regularly working has shrunk from 20 to 3, a drop of over 80%. At the same time, the number of directly employed drivers has stagnated at around 60.

These recent cutbacks at American Logistics come at a particularly sensitive time for EB-5 investors as none have yet received permanent resident status, according to the company’s annual filings. This raises serious questions for EB-5 stakeholders:

Why does the company appear to be reducing its truck driver workforce?

What impact will this have on investors when they apply for permanent resident status?

Is American Logistics’ goal of hiring almost 4,000 workers within the next three years credible?

Zero Jobs in Terminal Operations

American Logistics seems to have scaled back its growth plans, which may impact EB-5 investors. In a company presentation, American Logistics indicates that it will generate revenue from a terminal operations business by 2012. Although the company does not release financial information, public records suggest the terminal business never got off the ground. In its 2011 EB-5 activity report to the government, American Logistics reports zero jobs in terminal operations. Its 2012 report entirely omitted terminal operations as a category of job creation.

This raises several important questions:

Why has its terminal operations project seemingly failed to come to fruition?

Can it meet revenue and job growth projections absent a terminal operations business?

Is the company providing different information to investors and to the government?

Labor Conflict Increases Uncertainty

Recent conflicts between American Logistics management and workforce raise the possibility of a harmful labor dispute. Persistent workplace unrest can affect vital aspects of a company essential to job creation, like operational capacity, financial stability, and customer relations. For EB-5 investors, the stakes may be quite high as their immigration status and invested capital is on the line.

Conflict Timeline

January 30, 2013 – Dozens of truck drivers approach management with a request to address long standing grievances and respect their desire to have a voice on the job. Employees have since reported retaliation and harassment.

February 27, 2013 – Workers file unfair labor practice charges with the National Labor Relations Board, alleging that American Logistics violated federal labor law. These allegations are currently under investigation by the federal government.

March 1, 2013 – Accompanied by clergy and community supporters, dozens of employees return to petition executives to respect their right to form a union and refrain from unlawful behavior.

April 1, 2013 – American Logistics becomes subject to a second government investigation when an employee files additional unfair labor practice charges with the National Labor Relations Board.

Weakened Relationships with Government Officials

The relationship between regional center administrators and local and regional government officials is a key factor that EB-5 stakeholders consider when evaluating investment in a regional center.

Government officials representing the US congressional and city council districts where American Logistics is located and does business have sent letters to American Logistics’ owner, Mr. Alireza Mahdavi, expressing their concerns about the deteriorating situation between management and workers at the company.

The central issues raised by these government officials are matters of common concern to EB-5 investors, as they point out the detrimental effect that unresolved labor disputes can have on a company and its stakeholders.

In a letter dated April 17, 2013, U.S. Representative Janice Hahn urged American Logistics to comply with U.S. law and respect its workers’ rights, stating, “I hope that your company will do everything possible to remain neutral and help avoid the types of labor disputes that traditionally result from management’s interference with workers’ rights.”

Representative Hahn’s cautionary letter to American Logistics came on the heels of a March 28 letter from Carson City Councilman Mike A. Gipson. He also recommended that the company avoid a drawn-out conflict, stating, “Drivers seek to improve their conditions at the workplace, and to make your company – their company – a better and more successful place for all stakeholders, workers and management alike.”